WALL STREET PREP FINANCIAL
STATEMENT MODELING TERMINAL
CERTIFICATION EVALUATION COMPLETE
QUESTIONS WITH FULL SOLUTION
ALREADY PASSED
⩥ What is the 'going concern' assumption in accrual accounting?
Answer: It assumes companies will continue operating
indefinitely into the foreseeable future.
⩥ What is the principle of conservatism in accrual accounting?
Answer: It requires caution and thorough verification, leading to
a downward measurement bias in estimates.
⩥ Why are most assets recorded at historical cost?
Answer: To minimize the risk of overstating revenue or asset
values.
⩥ What role did fair-value accounting play in the subprime
mortgage crisis?
,Answer: It mandated financial institutions to update pricing of
illiquid securities, leading to write-downs.
⩥ Why are intangible assets not reflected on the balance sheet?
Answer: They cannot be accurately quantified and recorded
unless their value is observable in the market.
⩥ What happens to the balance sheet if a company's share price
increases by 10%?
Answer: There would be no change as shareholders' equity
reflects the book value of equity.
⩥ What is the difference between book value and market value?
Answer: Book value reflects the historical amount on the
balance sheet, while market value represents the company's
equity based on supply and demand in the market.
⩥ How is book value of equity calculated?
Answer: Book Value of Equity = Total Assets - Total Liabilities.
⩥ What is the book value of Apple's common stock as of FY
2020?
, Answer: Approximately $51 billion.
⩥ What is the market value of Apple's equity as of the guide's
publishing date?
Answer: Over $2 trillion.
⩥ Do accounts receivable appear on the income statement?
Answer: No, but they are captured indirectly in revenue.
⩥ Why do increases in accounts receivable reduce cash flow?
Answer: An increase indicates more customers paid on credit,
meaning cash has not yet been received.
⩥ Why is deferred revenue classified as a liability?
Answer: It represents obligations to deliver products or services
for which cash has already been received.
⩥ How is interest expense captured in the cash flow statement?
Answer: It is indirectly captured in the cash from operations
section, starting with net income.
STATEMENT MODELING TERMINAL
CERTIFICATION EVALUATION COMPLETE
QUESTIONS WITH FULL SOLUTION
ALREADY PASSED
⩥ What is the 'going concern' assumption in accrual accounting?
Answer: It assumes companies will continue operating
indefinitely into the foreseeable future.
⩥ What is the principle of conservatism in accrual accounting?
Answer: It requires caution and thorough verification, leading to
a downward measurement bias in estimates.
⩥ Why are most assets recorded at historical cost?
Answer: To minimize the risk of overstating revenue or asset
values.
⩥ What role did fair-value accounting play in the subprime
mortgage crisis?
,Answer: It mandated financial institutions to update pricing of
illiquid securities, leading to write-downs.
⩥ Why are intangible assets not reflected on the balance sheet?
Answer: They cannot be accurately quantified and recorded
unless their value is observable in the market.
⩥ What happens to the balance sheet if a company's share price
increases by 10%?
Answer: There would be no change as shareholders' equity
reflects the book value of equity.
⩥ What is the difference between book value and market value?
Answer: Book value reflects the historical amount on the
balance sheet, while market value represents the company's
equity based on supply and demand in the market.
⩥ How is book value of equity calculated?
Answer: Book Value of Equity = Total Assets - Total Liabilities.
⩥ What is the book value of Apple's common stock as of FY
2020?
, Answer: Approximately $51 billion.
⩥ What is the market value of Apple's equity as of the guide's
publishing date?
Answer: Over $2 trillion.
⩥ Do accounts receivable appear on the income statement?
Answer: No, but they are captured indirectly in revenue.
⩥ Why do increases in accounts receivable reduce cash flow?
Answer: An increase indicates more customers paid on credit,
meaning cash has not yet been received.
⩥ Why is deferred revenue classified as a liability?
Answer: It represents obligations to deliver products or services
for which cash has already been received.
⩥ How is interest expense captured in the cash flow statement?
Answer: It is indirectly captured in the cash from operations
section, starting with net income.
